David Winters (Trades, Portfolio)’ Wintergreen Fund (Trades, Portfolio) disclosed on Thursday that the fund trimmed its holdings of five companies during the second quarter: Heineken Holding NV (XAMS:HEIO, Financial), British American Tobacco PLC (BTI, Financial), Bergbahnen Engelberg-Truebsee-Titlis AG (XSWX:TIBN, Financial), Nestle SA (XSWX:NESN, Financial) and Atria Group Inc. (MO, Financial).
Guru stresses the importance of “respect to stock valuations”
Winters underscored in his semiannual report that “true value investing requires discipline with respect to stock valuations.” Even if a company meets the fund’s investing criteria, the stock “may eventually trade at a valuation” that reflects “full value after providing significant gains.” The investor sold two of the fund’s holdings during the first half as the companies have, in his opinion, achieved their full value: Sika AG (XSWX:SIK, Financial) and Frutarom Industries Ltd. (XTAE:FRUT).
Heineken
The fund sold 70,347 shares of Heineken for an average price of 84.28 euros ($97.80) per share, trimming the equity portfolio 3.12%.
The Dutch brewer manufactures premium, regional, local and specialty beers and ciders through various brands, including Heineken, Amstel, Anchor and Biere Larue. GuruFocus ranks the company’s profitability 7 out of 10 on several positive investing signs, which include expanding profit margins and a strong Piotroski F-score of 8.
Although the company has good growth potential, Heineken’s share price is near its 10-year maximum price-sales value, suggesting high overvaluation.
British American Tobacco
The fund sold 53,718 shares of British American Tobacco for an average price of $52.69 per share, reducing the equity portfolio 1.33%.
GuruFocus ranks the U.K.-based tobacco company’s profitability 7 out of 10 as net margins and returns are outperforming over 90% of global competitors. Additionally, the company has a GuruFocus business predictability rank of three stars out of five. Despite this, the website also lists several red flags, including poor earnings quality and contracting gross margins.
Bergbahnen
The fund sold 3,524 shares of Bergbahnen for an average price of 443.29 francs ($457.54) per share, trimming the equity portfolio 0.69%.
GuruFocus ranks the Swiss cable-car company’s financial strength 9 out of 10 on several positive signs, which include a strong Altman Z-score of 8.48 and robust interest coverage of 276.32. The company also has a strong profitability rank of 8, driven by a 2.5-star predictability rank and a Piotroski F-score of 8.
Nestle
The fund sold 16,378 shares of Nestle for an average price of 75.68 francs per share, trimming the equity portfolio 0.56%.
Although the company has expanding profit margins, Nestle has six medium warning signs, including four related to price valuations. The company’s share price, price-earnings ratio, price-book ratio and price-sales ratio are all near a 10-year high.
Altria
The fund sold 9,167 shares of Altria for an average price of $57.7 per share, reducing the portfolio 0.25%.
GuruFocus ranks the Richmond, Virginia-based tobacco companys profitability 7 out of 10 and lists several positive signs, which include expanding profit margins and a dividend yield near a three-year high. The company’s operating margin is near a 10-year high of 38.05% and outperforms 95% of global competitors. Despite this, decelerating revenue growth detracted from the company’s profitability rank.
Disclosure: No positions.
